Teodoro’s Mission Impossible
Teodoro Petkoff’s stint as a minister (1996-1998) is largely forgotten, or misremembered as a failure. In fact, his success at an impossible task—structural adjustment—was remarkable, almost unprecedented.
Photo: El Estimulo retrieved
It’s been gratifying to witness the outpouring of emotion and respect for Teodoro Petkoff. But there’s one chapter of his life that obituarists have missed again and again. With few exceptions, his time as Ministro de CORDIPLAN has been commemorated with… silence.
I get it: it sounds boring. Powerful as the position was, Ministro de CORDIPLAN just doesn’t evoke the same drama as, say, Marxist guerilla. Or prison escapee. Or even editor-in-chief. Indeed, Ministro de la Oficina Central de Coordinación y Planificación is a title so boring that I’m not sure how to translate it into English. Planning Minister? Coordination Minister? Minister of the Interior? Snooze.
But don’t be deceived. It was as Minister—more than in his other roles—that Teodoro out-swashbuckled the competition. It was as Minister that Teodoro achieved something exceedingly rare: belt-tightening economic reforms without a popular backlash. Neoliberalism with a human face. The paquete without the –tazo.
There’s one chapter of Teodoro’s life that obituarists have missed again and again. With few exceptions, his time as Ministro de CORDIPLAN has been commemorated with… silence.
To understand the Herculean dimensions of this feat, recall how bad things were when Teodoro was appointed in early 1996.
Caldera was two years into his term. He had been elected largely on his excoriation of CAP’s reform program—but then he showed up without a plan of his own. Classic y-tú-qué-propones problem. As Francisco Monaldi and coauthors recount in their excellent analysis, Caldera dawdled responding to the banking crisis. He abolished VAT with a flourish, then sheepishly reinstated it when he ran out of money. Floundering at the end of his first year, he fixed the exchange rate and imposed price controls. Sound familiar?
By early 1996, there were rumblings from Fuerte Tiuna. Some even questioned whether Caldera would make it through his term.
Enter Teodoro. His mission was to raise government revenue or reduce spending or (ideally) both, without sparking another Caracazo—all in some of the worst external conditions (econospeak for low oil prices) in Venezuelan history. The new structural adjustment program, the Agenda Venezuela, had to be everything that CAP’s Gran Viraje wasn’t.
The first thing that Teodoro did was listen. He met with business leaders, congresspeople, and civil society organizations. He schlepped all over the country to hear people out. He led a long negotiation with CTV and Fedecámaras to reach consensus on labor market reforms.
I know, it doesn’t sound like rocket science. But compare this to what came before. CAP not only designed his paquete in near-secret. Incredibly, he didn’t listen even after the Caracazo. In May of 1989, CAP’s report to the IMF underscored his commitment to the original content and pace of the reforms. In April, he raised electricity tariffs and domestic mineral prices. It wasn’t until the end of 1991—nearly two years after the Caracazo—that CAP announced the so-called Megaproyecto Social.
The first thing that Teodoro did was listen. He met with business leaders, congresspeople, and civil society organizations.
Which is all to say, let’s not take Teodoro’s listening for granted.
And that wasn’t all. CAP’s Gran Viraje did contain a promise of direct subsidies for poor families. But Teodoro set an explicit and ambitious target: to increase social spending by 1% of GDP. In relative terms, that was a huge hike. There was a cash transfer for poor families with children. A doubling of old-age pensions. And when the Agenda Venezuela raised gas prices, Teodoro built in a clever subsidy to shield public transportation prices.
He was also a better salesman. On television and in print, Teodoro explained why the reforms were necessary and what people should expect. In place of technocratic gobbledygook about “balance-of-payments liabilities” and “current-account surpluses,” he said simply that when a government runs out of money and credit, it has to either raise revenue or reduce spending (or both). Unsatisfied with press appearances alone, he wrote a whole book about why liberal reforms would advance what had long been his goals: poverty reduction, growth with equity, and, ultimately, democracy.
The proof was in the quesillo. Teodoro and his Agenda Venezuela beat most of their targets. They projected a 1% GDP contraction in 1996, but the economy did much better than that, shrinking just 0.2% in 1996 and then growing 6.4% in 1997. The fiscal situation improved, too, and ahead of schedule. Compare this to the analogous figures for the Gran Viraje: a projected contraction of 2.7% for 1989 turned into a whopping 8.3% drop.
Many on the left see the CORDIPLAN years as the time when Teodoro sold out, compromising his principles for a taste of power. On the right, people think that his market-oriented reforms didn’t go far enough: if only Teodoro had floored the neoliberal gas pedal, the story goes, the economy would have done even better and Chávez would never have been elected.
These narratives are wrong. The fact that the CORDIPLAN years have been so absent from this week’s tributes is actually evidence of Teodoro’s success. The Agenda Venezuela is the structural adjustment you don’t hear about. The neoliberal reform without riots. The tax hike without public outcry. The labor reform without union opposition. The liberalization of gas prices, sin que pasara nada.
The Agenda Venezuela is the structural adjustment you don’t hear about. The neoliberal reform without riots.
Of course, the Agenda Venezuela was far from perfect. The oil stabilization fund was approved too late. Inflation continued apace. Contracts for private oil companies were overly generous (though that was not Teodoro’s doing). But the Agenda Venezuela doesn’t just compare favorably to the Gran Viraje fiasco—it compares favorably to basically any other market reform in the region.
It’s not an exaggeration to say that it was as good as tough reforms get.
Traumatized by the current crisis, Venezuelans sometimes see the second Caldera administration as prelude: the last, wasted chance to prevent disaster. To me, it looks more like a valiant effort sabotaged by the vagaries of the oil market.
What might have happened if oil prices hadn’t tanked at the worst possible moment? How would we remember Teodoro’s contribution if external conditions had buoyed his smart reforms, rather than dragging them down? If oil had ticked up to $20/barrel in 1997 rather than down to $10, wouldn’t Teodoro have been seen as the logical heir to a very successful presidency? Perhaps. And perhaps the kid from Sabaneta would be remembered as a footnote, if at all.
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